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Wednesday, December 7, 2016

Are You Happier In Saving Extra $X OR Earning Extra $X?

There is a saying (from personal finance perspective) : "How much you earned is not the key, the key is how much you've saved"!

Do you buy it?

Of course, again, there is no right or wrong answer to this but more of a personal viewpoint.

Having said that, I think it is beneficial for us to identify our own preference so that we can focus on the action that will make us happier. Hence, the purpose of this post :

"Are you happier in savings extra $X OR earning extra $X?"

Example:

Assuming all things being equal, you can either :

A) Save extra $1,000 per month OR

B) Earn extra $1,000 per month

Which option (A or B) will make you happier?

Conditions:

1. For Option (A), you need to find way to cut-down your expenses in order to save the extra $1,000 ;

2. For Option (B), you need to find way to earn the extra $1,000 and can save or spend all or part of the extra money you've earned, it's up to you.

3. For Option (B), it can be passive or active income but try not to be restricted to the income from investment only

4. In measuring your happiness, please exclude the potential accumulated net-worth as one of the criteria, otherwise, Option (A) will have unwarranted advantage over Option (B).

Personally, I used to be more inclined to (A) but have since moving towards (B) nowadays. My rationale: Option (A) is limited to how much (expenses) you can cut while Option (B) has limitless upside AND opportunities to create multiple income streams (passive or active) is much more promising nowadays.

I'll do the easy way out first, so it's (A), to reduce expenses. Once nothing else can be cut without suffering a drop in happiness level, I'll do (B). Since there's already a good grounding in basic level of spending to maintain happiness level, an increase in income will not cause a corresponding increase in spending. So the sequence is as important too :)

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